Estimates of Potential Harm to U.S. Small and Medium-Sized Businesses from Proposed Abuse-of-Dominance Antitrust Legislation Aimed at Large Digital Platforms
For over a century, U.S. competition law has focused on protecting consumers from specific harms that result from a lack of marketplace competition: higher prices, fewer choices, declining service, and less innovation. Recently, some U.S. policymakers have tried to adopt a more “European-style” approach to competition that focuses less on consumer harm and more on the competition between businesses. This report uses a bespoke economic model to estimate that if European-style competition concepts, also called “abuse of dominance” (AOD), become law in the U.S., it could cost small and medium-sized businesses (SMBs) more than $600 billion in lost sales revenue annually.
State policymakers are considering AOD bills in response to the success of America’s leading digital platforms, including Amazon’s online marketplace, Google’s search and advertising platforms and app store business, Meta’s Facebook, and Apple’s app stores. These bills would, among other things, make it illegal for these platforms, or any platform that meets an arbitrary definition of “dominant,” to engage in any practices that harm competitors, including practices that benefit consumers, such as lowering prices or improving security.
The model estimated the harm to SMBs from the disruption of digital online marketplaces, digital advertising, and other digital tools that SMBs use to run and grow their businesses. First, we modeled a “heavy” scenario where AOD becomes the de facto standard for U.S. competition law nationwide, following several states passing such a law, and companies implement the standards nationwide (similar to automobile emissions standards) or if the federal government passes a similar law. Under this scenario, for the SMBs selling physical goods, nationwide SMB revenue losses are estimated to total $670 billion annually, translating into an average sales loss of $14,000 per month per U.S. SMB in the manufacturing, wholesale trade, and retail trade sectors.
We also modeled more limited scenarios in which, for example, AOD becomes law in only New York (which has recently considered such legislation) and found that the harm to SMB revenue both in-state and in other states is still significant. For example, AOD laws would reduce NY-based SMB sales by $41 billion annually and SMB sales in other states (because of interstate commerce) by another $19.9 billion annually, for a total harm of $60.9 billion per year, or an average of $1,270 per month per U.S. SMB.
Lawmakers at all levels of government should strongly consider the wide-ranging economic implications of a potential European-style revision of longstanding U.S. antitrust law.